PNC Earnings Drop 2.5% on Costs to Integrate RBC Bank USA

PNC Financial Services Group Inc., the sixth-biggest U.S. bank by deposits, reported a 2.5 percent drop in first-quarter profit as the bank spent $145 million on its acquisition of Royal Bank of Canada’s U.S. consumer unit.

Net income fell to $811 million, or $1.44 a share, from $832 million, or $1.57, a year earlier, the Pittsburgh-based bank said today in a statement. Per-share earnings were $1.62 excluding integration costs, compared with the $1.48 average estimate of 28 analysts surveyed by Bloomberg.

PNC paid about $3.47 billion for RBC Bank USA and related credit-card assets, a transaction that was completed last month. Chief Financial Officer Richard Johnson said earlier this year the acquisition was expected to contribute to a “mid- to high- teens” percentage increase in loans and a “mid- to high-single digits” increase in revenue in 2012.

“With the completion of our acquisition of RBC Bank USA, we plan to leverage our brand” and expand in the Southeast, Chief Executive Officer Jim Rohr, 63, said in the statement.

Johnson said in January the bank expected to record $170 million of integration costs in the first quarter related to the purchase of the RBC assets.

First-quarter revenue rose 2.8 percent to $3.73 billion from last year as income from PNC’s residential mortgage business gained 18 percent to $230 million. Non-interest expenses increased 19 percent to $2.46 billion.

Credit Losses

PNC set aside 56 percent less for soured loans in the first quarter as the bank’s provision for credit losses fell to $185 million. Net charge-offs were $333 million in the period, compared with $533 million a year earlier. PNC is focusing on managing its credit costs and expenses, Rohr said in January.

Total loans grew to $164.6 billion as of March 31 from $150.1 billion at the same time last year as PNC recorded a 23 percent increase in commercial loans, which rose to $69.3 billion from $56.3 billion.

PNC’s net interest margin, the difference between what the bank pays to borrow money and what it gets for loans, narrowed to 3.9 percent from 3.94 percent last year and widened from 3.86 percent in the fourth quarter. U.S. lenders are facing a squeeze on profits as record-low interest rates put pressure on net interest margins.